1,721,637 research outputs found
The ECB’s close cooperation on supervising banks in Bulgaria and Croatia
Full text linkThe close cooperation arrangement for Bulgaria and Croatia poses challenges for the ECB that we discuss in terms of existing and emerging risks and vulnerabilities in the two banking sectors. The focus is on three risk areas: money laundering, climate change risk, and geopolitical tensions related to the Russia-Ukraine conflict. The high political and economic uncertainty arising from this conflict requires a reassessment of existing risks (such as credit and sovereign risks) and sources of new risks. These risk drivers are intertwined and can affect supervised entities through existing vulnerabilities at the bank as well as at the country level, primarily poor asset quality and the weak institutional framework. This document was provided by the Economic Governance Support Unit at the request of the ECON Committee
Financial Sector Development in Africa : Opportunities and Challenges
No full textAfrica's financial systems face
challenges across many dimensions, as discussed in the
report financing Africa: through the crisis and beyond. The
analysis in that report was based partly on several detailed
background papers that are included in this volume. The next
six chapters are written by experts in their respective
areas and provide an in-depth analysis of these challenges
and present possible solutions. In this introduction, the
authors provide an overview of the different chapters and
how they are related to each other and the main volume. The
three chapters in first part focus on key challenges
concerned with access to financial services, including
financial and operational deficiencies in the microfinance
market, reaping the benefits from the technological
revolution of retail banking, and deepening and broadening
agricultural finance across Africa. The three chapters thus
each cover different aspects with a different focus, ranging
from an institutional approach to a focus on innovation as a
driver of financial broadening to an important element of
financial infrastructure to a specific sector. The second
part includes the fourth chapter, it involves documents the
sizable need for additional housing in many African
countries, based on these countries' continuous
population growth and an ongoing urbanization trend. The
third part includes fifth chapter, which discuss the
repercussions of regulatory reforms in Europe and North
America for African regulators as well as local challenges.
The fourth part includes the sixth chapter, which is the
final chapter of this volume. It discusses the politics of
financial sector reform in Africa and, more specifically,
the space needed for an activist role for government to help
create the markets and coordination mechanisms necessary for
financial markets to deepen and broaden
Can the Banking Union foster market integration, and what lessons does this hold for Capital Markets Union?
Full text linkWe discuss the contribution of the Banking Union in its current form to market integration in the euro area. While the introduction of single supervision has fostered banking integration, limited progress in single resolution and the absence of a European deposit insurance scheme undermine further advancements. We argue that a significant obstacle to financial integration lies in the persistence of national interests in regulation, supervision, and politics. We also explore the lessons that can be learned from ten years of the Banking Union for the development of the Capital Markets Union and the integration of capital markets. The successes of the Banking Union in common supervision and rule-setting can provide a path forward
Evolving key risks in the banking sector, and related priorities for the SSM
Full text linkThis paper points to new multifaceted and often interconnected sources of risks(including high-impact tailrisks) and the challenges posed to supervisory actions. It also makes the important case that traditional risk management tools might face limitations in the current situation. We discuss both geopolitical and related risks as
well as other risks in the context of rising interest rates and a volatile macroeconomic environment. The challenge for banks will be to be prepared for such extreme scenarios. New approaches to risk management are needed, combining quantitative and qualitative assessment. Banks’ strategic plans need be to set towards long-term objectives, but also have to be flexible enough to allow for the possibilities of tail risks. In terms of supervisory actions, these considerations call for a very-bank specific
monitoring approach
Structural changes in European financial systems: the impact of the regulatory framework on investment in the European Union
No full textEuropean countries have undertaken a large number of regulatory reforms or are in the process of doing so, ranging from higher capital and liquidity requirements for banks and a banking union for the eurozone to new regulatory frameworks for the insurance and investment fund sectors. We focus on the main regulatory reform programmes and proposals over the past five years. Many of these were initiated after the onset of the global financial crisis by the G20 and their implementation has progressed reasonably swiftly. These include the Basel III reforms of capital and liquidity requirements and the attempt to centralise trading of securities previously traded over-the-counter. On the other hand, there are reform proposals, which are politically controversial, both within and across countries,
which have made only limited progress so far. Among these are activity restrictions on banks and suggestions for a security transaction tax. Most importantly, discussions on complementing the currency union in the eurozone with an effective banking union are still ongoing and there are critical decisions that still need to be taken. We argue that the evidence suggests that the agreed reforms and many of the proposed ones will have moderate effects on banks’ funding costs and thus real investment. The largest effects, including on
market structure and corporate financing structures, are likely to come from the resolution of the eurozone crisis and the design of the banking union. Our main policy conclusion is therefore that priority should be given to completing the banking union’s unfinished parts so that it can operate effectively. This will go a long way to helping resolve the eurozone crisis. The banking union comprises a Single Supervisory Mechanism (SSM), a European deposit insurance system and a European Resolution Mechanism (ERM). The ultimate goal of the banking union appears to be the preservation of the Single Market in financial services and the avoidance of having to provide
taxpayers’ money in support of distressed banks. None of the three pillars of the banking union have been formally approved to date. Negotiations and proposals are at an advanced stage for the creation of the SSM, and at an earlier stage concerning the
ERM. No proposals are under discussion currently concerning the creation of a European deposit insurance system. We believe it is important that all three pillars be approved and implemented as soon as possibl
Resolution of failed banks by deposit insurers : cross-country evidence
Full text linkThere is a wide cross-country variation in the institutional structure of bank failure resolution, including the role of the deposit insurer. The authors use quantitative analysis for 57 countries and discuss specific country cases to illustrate this variation. Using data for over 1,700 banks across 57 countries, they show that banks in countries where the deposit insurer has the responsibility of intervening failed banks and the power to revoke membership in the deposit insurance scheme are more stable and less likely to become insolvent. Involvement of the deposit insurer in bank failure resolution thus dampens the negative effect that deposit insurance has on banks'risk taking.Banks&Banking Reform,Financial Crisis Management&Restructuring,Financial Intermediation,Corporate Law,Insurance&Risk Mitigation
Financial institutions and markets across countries and over time - data and analysis
Full text linkThis paper introduces the updated and expanded version of the Financial Development and Structure Database and presents recent trends in structure and development of financial institutions and markets across countries. The authors add indicators on banking structure and financial globalization. They find a deepening of both financial markets and institutions, a trend concentrated in high-income countries and more pronounced for markets than for banks. Similarly, the recent increase in cross-border lending and debt issues has been concentrated in high-income countries, while low and lower-middle income countries have experienced an increase in remittance flows. Low net interest margins, rising profitability and declining stability in high-income countries’ banking sectors characterize the recent financial sector boom in high income countries leading up to the global financial crisis of 2007.,Debt Markets,Emerging Markets,Banks&Banking Reform,Economic Theory&Research
Finance, inequality, and poverty: cross-country evidence
Full text linkWhile substantial research finds that financial development boosts overall economic growth, the authors study whether financial development is pro-poor: Does financial development disproportionately raise the income of the poor? Using a broad cross-country sample, the authors find that the answer is yes: Financial intermediary development reduces income inequality by disproportionately boosting the income of the poor and therefore reduces poverty. This result is robust to controlling for simultaneity bias and reverse causation.Health Economics&Finance,Payment Systems&Infrastructure,Economic Conditions and Volatility,Economic Theory&Research,Environmental Economics&Policies,Inequality,Economic Theory&Research,Achieving Shared Growth,Health Economics&Finance,Governance Indicators
Islamic vs. conventional banking : business model, efficiency and stability
Full text linkThis paper discusses Islamic banking products and interprets them in the context of financial intermediation theory. Anecdotal evidence shows that many of the conventional products can be redrafted as Sharia-compliant products, so that the differences are smaller than expected. Comparing conventional and Islamic banks and controlling for other bank and country characteristics, the authors find few significant differences in business orientation, efficiency, asset quality, or stability. While Islamic banks seem more cost-effective than conventional banks in a broad cross-country sample, this finding reverses in a sample of countries with both Islamic and conventional banks. However, conventional banks that operate in countries with a higher market share of Islamic banks are more cost-effective but less stable. There is also consistent evidence of higher capitalization of Islamic banks and this capital cushion plus higher liquidity reserves explains the relatively better performance of Islamic banks during the recent crisis.Banks&Banking Reform,Debt Markets,Access to Finance,Financial Intermediation,Bankruptcy and Resolution of Financial Distress
Gender and finance in Sub-Saharan Africa : are women disadvantaged ?
Full text linkThis paper assesses whether there is a gender gap in the use of financial services by businesses and individuals in Sub-Saharan Africa. The authors do not find evidence of gender discrimination or lower inherent demand for financial services by enterprises with female ownership participation or by female individuals when key characteristics of the enterprises or individuals are taken into account. In the case of enterprises, they explain this finding with selection bias -- females are less likely to run sole proprietorships than men, and firms with female ownership participation are smaller, but more likely to innovate. In the case of individuals, the lower use of formal financial services by women can be explained by gender gaps in other dimensions related to the use of financial services, such as their lower level of income and education, and by their household and employment status.Access to Finance,Banks&Banking Reform,Emerging Markets,Housing&Human Habitats,Gender and Law
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